A brief discussion on risk prevention in credit card business

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After joining the WTO, my country’s financial market has further opened up, and competition for customers in the financial market has The situation is unprecedentedly fierce. In the domestic financial industry, the quality of financial assets is generally low and the ability to grasp customers is weak. In particular, the means of attracting individual customers are basically passive and short-term. Foreign-funded banks will have a huge impact on the various businesses of my country's state-owned commercial banks with their strong financial strength, advanced technical means, mature management and flexible operating mechanisms. Bank cards are market-oriented tools for contacting customers, gathering funds and increasing profits. A modern and popular financial product will surely become the focus of competition in the banking industry at home and abroad. Therefore, objectively analyzing the advantages and disadvantages of both domestic and foreign competitors will help us accurately position ourselves, respond calmly, and remain proactive in future competition to adapt to the impact of the wave of reform and opening up.

Based on the existing research results in recent years, this article uses data methods, comparative analysis methods and other methods, and based on the theory of economic globalization, analyzes the current situation and existing risk problems of bank cards in my country, and draws lessons from Use successful foreign experiences to propose countermeasures and find solutions.

1. The general theory of credit cards and the risks in their development

(1) The general theory of credit cards

1. The concept and characteristics of credit cards

Bank cards refer to credit payment instruments issued to the society by domestic commercial banks (including postal financial institutions) with all or part of the functions of consumer credit, transfer settlement, cash deposits and withdrawals, etc. . Bank cards include credit cards and debit cards. Credit card refers to a credit payment instrument provided by banks or non-bank financial institutions to their customers with functions such as consumer credit, transfer settlement, and cash deposits and withdrawals. It is specially made of special plastic, with the cardholder's card number, name, expiration date and other information embossed on it. Cardholders can use the card to make direct purchases at specially appointed merchants or deposit, withdraw and transfer funds at their designated institutions and devices.

Simply put, credit cards are versatile, safe, convenient and fast, including the following three aspects:

(1) From the perspective of the card issuer, banks can use this as It is a means to expand store sales and provide services to cardholders, and obtain a certain percentage of commissions and handling fees on transactions. If the credit card holder cannot repay the loan on time, it can also increase a certain amount of interest income.

(2) From a customer perspective, cardholders can obtain goods and services without having to pay cash, eliminating the inconvenience and risk of customers carrying large amounts of cash. It is extremely convenient and safe to go shopping and travel.

(3) From the perspective of merchants, credit cards closely link the card-issuing bank, the cardholder, the special merchant, and the agency bank, forming a recurring chain debt relationship, and the establishment of this relationship and Development all depends on the credit provided to each other. Commercial companies or service companies can provide goods or services to cardholders without any worries because they can collect payment from banks in a timely manner under the guarantee of bank credit, and at the same time expand sales and avoid debts caused by commercial credit. chain.

2． Functions and uses of credit cards

Credit cards have five basic functions, including:

(1) Direct consumption function, which is the most basic function of a credit card. Cardholders can use cards instead of cash to settle payments at special merchants marked with the credit card mark, including stores, hotels, restaurants, entertainment venues, airports, hospitals and other places.

(2) Savings deposit function. The bank calculates interest on the margin, reserve funds and other deposits in credit card accounts at prescribed interest rates and treats them as savings deposits.

(3) With the general deposit and withdrawal function, you can deposit and withdraw money at any bank's business office during working hours with a credit card, or you can withdraw money at automatic teller machines 24 hours a day.

(4) Transfer settlement function. Cardholders can use the card to transfer funds from their own accounts at bank business offices, or use ATM machines or telephone banking to transfer funds from their credit card accounts to other accounts. .

(5) Overdraft credit function, cardholders can overdraft consumption within the limit allowed by the card-issuing bank, but must repay the overdraft as soon as possible.

(2) Risks in the development of credit cards

"With one card in hand, you can travel all over China", which expresses the charm of credit cards. Today, with the rapid development of society, rapid changes, and rapid technological advancement, credit cards are accepted and recognized by an increasingly wide range of people, and have made great progress. However, risks always go hand in hand with convenience. While people enjoy the convenience of credit cards, they also bear the burden of The risks brought by credit cards include the following five risks:

1. Credit risk, first of all, is the risk of malicious overdraft. For the card-issuing bank, malicious overdraft is the most common credit card risk. Some cardholders maliciously overdraft and evade debts. At the same time, it also poses a great threat to the fund security of the card-issuing bank. Some cardholders Cardholders with ulterior motives engage in malicious overdrafts in order to obtain funds from the card-issuing bank. For example, in 1995, more than 1,200 people at a certain bank maliciously overdrafted their credit cards, with the overdraft amount reaching more than 8.5 million yuan, causing a direct economic loss of more than 7 million yuan. Through the public security organs and courts, The number of people whose sentences have not been recovered by other departments has reached 56; some people used false certificates, forged identity documents, guarantee information, etc. to defraud bank credit; and some people used black cards or fake cards to steal bank funds. Secondly, there is the risk of changes occurring to the cardholders. Some cardholders may be in good financial condition and have strong repayment ability when they receive the card, but due to time reasons or other changes, the cardholders may not be able to fulfill their obligations in the credit card business. obligations, resulting in losses to the bank, such as: the cardholder dies or the economic situation deteriorates, and loses the ability to repay the overdraft; the contact with the card-issuing bank is interrupted, and the card-issuing bank cannot control the use of its credit card; the company goes bankrupt due to changes in the corporate structure of corporate cards , property is frozen or litigation preservation, etc. Such various illegal possessions of bank credit funds constituted credit risks in the credit card business and brought us huge economic losses.

2． Operational risk. The credit card business is an electronic business that requires business personnel to perform various operations. If you are not careful, it will bring huge risks. The first is the risk of improper operation by the special merchants, which is mainly manifested in the cashier not checking the identity documents and documents according to the operating regulations. Reserve signatures, etc., leading to loss of credit; secondly, there is the risk of bank staff's work errors. Taking transfers as an example, if the recipient's account number is entered by mistake, the funds will be transferred to another account, and the money must be transferred from another account. It's not that easy to go back. Not long ago, some media reported that a sudden increase of more than 20 billion yuan in a cardholder's account was found to be caused by bank operators' misoperation. The third is the risk of committing crimes, which mainly exists within the bank. The relevant business personnel took advantage of their powers to Committing crimes internally, or colluding with criminals in the society to commit crimes together, such as forging or modifying vouchers, illegal authorization, stealing cardholder information to check in, etc. Such cases are often deeply hidden and involve huge amounts, thus bringing great consequences to banks. The losses to come are immeasurable; it can be seen that operational risks cannot be ignored.

3. Technical risks. The hardware and system software used in my country's credit card business are all imported products, and their core parts are controlled by foreign countries. Once problems arise, the system will face a huge threat. Secondly, my country's credit card business application software development basically adopts two modes: self-development and program outsourcing. Due to the high mobility of talents, these two methods will undoubtedly leave security risks: developers use their application to achieve certain purposes. Full knowledge of the program to damage the system or steal bank funds. Third, the credit card business relies on the Internet, and hacker attacks and network virus infringements pose technical risks to the credit card business.

4． Legal risk, that is, fraud risk. Some criminals often use other people's lost credit cards or even forged credit cards to defraud the issuing bank of funds. In fact, credit cards have always been the "prey" of criminals around the world. For example, in Germany, credit card crimes are In the late 1980s and early 1990s, the growth rate almost kept pace with credit card consumption; it was mainly manifested in the fraudulent use of lost credit cards, fraudulent use of stolen credit cards, forged purchase orders by special agencies, forged credit card crimes, etc.; in terms of credit card business, although "two "High" (Supreme People's Procuratorate and Supreme People's Court) and the National People's Congress issued the "Decision on Punishing Crimes that Disrupt Financial Order", but the legislation on the responsibilities, rights and interests of the credit card market entities is not clear yet, so in There are significant legal risks in the credit card business, and some business regulations and operating practices are currently unavailable.

5. Market competition risks. The credit card business has attracted a large number of domestic and foreign competitors with its huge profits and broad development prospects. Institutions involved in the credit card business inevitably face the risk of market competition of "survival of the fittest and survival of the fittest". For our country's credit card institutions, they first face competition from domestic peers in terms of market share, technical talent, service quality, and technological content. Secondly, they face challenges from foreign banks. Credit card companies in Europe and the United States have advanced business concepts and rich experience. Management experience, as well as excellent professional talents and mature network technology, have great competitive advantages. Now that my country has joined the World Trade Organization, it is foreseeable that after the opening of banking retail services, competition in my country's credit card market will be unprecedentedly fierce.

2. Causes of credit card business risks

Credit card business risks refer to the abnormal economic losses suffered by the issuer, cardholder and special unit during the use of credit card transactions. possibility. Our country’s credit cards are essentially quasi-credit cards, that is, you must “deposit first, then spend”, but they also have the function of a bona fide overdraft, which means that cardholders can apply for a credit line from the bank when they are in urgent need of money. , to solve the urgent need. Due to the wide coverage of credit cards, risks will arise if you are not careful during use. The reasons for the formation of credit card risks are generally as follows:

1. Credit card business and legal relationships are complex

The legal relationships involved in credit card business are complex and sometimes change. For example, according to the relevant credit card regulations, the relationship between the cardholder and the card issuer is actually one. A kind of lending relationship. When the cardholder makes a purchase, the card-issuing bank advances payment in advance and then collects the cardholder's principal and interest. However, due to the complexity of the cardholder's composition and the instability and limitation of income, the risk is relatively high. . Therefore, if good-faith overdrafts on credit cards are not strictly controlled in terms of approval, management, collection, etc., once the cardholder is unable to repay, it will create risks or bad debts for the bank.

2． Cardholders do not take good care of their credit cards

The card is used as a credit certificate issued by the bank. The cardholder can directly use it to handle deposits, withdrawals or consumption transfers. If it is not taken care of well, it will be a crime for criminals. If used, it is easy to cause losses to cardholders, mainly in the following points:

(1) Careless storage and failure to keep credit cards and identity documents separately. Credit cards should be kept like cash and Valuables should also be taken care of, and should not be left randomly to allow thieves to take advantage of them. When handling credit card business, the ID card is the document that the cardholder must present when withdrawing cash or transferring money. It is also the standard for banks to confirm the identity of the cardholder. If the cardholder only has a credit card but no ID card, the bank will not This business is accepted (except for color photo cards). Therefore, credit cards and ID cards should be kept separately to prevent them from being lost together and making it easy for criminals to use them fraudulently.

(2) Borrow or transfer the credit card at will. According to the relevant provisions of the credit card regulations, the credit card can only be used by the cardholder himself, so that the card-issuing bank and the special unit can carry out credit control, and some cardholders Ignoring the relevant regulations and transferring your credit card to others without authorization will not only bring difficulties to the credit control of the card-issuing bank and the special agency, but also if the borrower or transferee has bad intentions and misuses the credit card, it will also bring serious consequences to the cardholder. poses a great risk.

(3) Poor storage of passwords or documents. Credit cards generally have ATM cash withdrawal functions (except corporate cards). Each credit card has a specific password. The documents in the credit card business record the cardholder’s transaction. The business voucher contains the relevant information of the cardholder. If the cardholder does not keep the password and documents well and is stolen by others, it will bring unsafe factors to the cardholder and even greater risks.

3. Imperfect management of card issuers

Credit card business has high technological content, wide coverage, and high risks. my country’s credit card business started late, and there are certain deficiencies in management work, which are mainly reflected in: practitioners Low quality is reflected in the lax or inability to control the applicant's credit investigation and approval process, resulting in out-of-control credit; insufficient training of merchant personnel, resulting in the inability to handle normal business; carelessness or internal and external collusion in authorized business, resulting in immeasurable consequences Risks; during business processing, risks may arise due to untimely settlement and mis-recording of accounts, for example, mis-recording of accounts in deposits, withdrawals and transfers, or even misrecording of account amounts, resulting in card holders with due balances. People were unable to sign the bill, but cardholders who had already incurred overdrafts were able to withdraw money as usual.

Although the existence of risks has its own contingency, as long as people take various preventive measures in advance and effectively strengthen risk management, they can reduce the occurrence rate of risks and reduce the losses caused after the risks occur.

3. Credit card risk prevention and control

(1) The role and significance of credit card risk management

1. The role of credit card risk management

Credit card risk management refers to a series of management tasks in which card issuers take preventive measures against possible risks in their operations and management, and take remedial measures after the risks occur. The main functions of credit card risk management are as follows:

(1) Maintaining the existence of the card issuer. In order to prevent card issuers and even individuals and families from suffering devastating losses due to the occurrence of events, maintaining survival has become the most basic and important goal of risk management after a loss. Under the sudden attack of risks and unexpected events, we can be fully prepared financially, materially, and psychologically so that we can maintain our survival when risks arise. Only by maintaining the company's existence can there be future recovery and development. From this we say that maintaining survival is the primary purpose of risk management for card issuers.

(2) Achieve stable earnings and sustained growth for card issuers as soon as possible. After a risk occurs, through risk management, on the one hand, it can assist the card issuer itself to resume operations through financial compensation, thereby ensuring the continuity of operations; on the other hand, it can provide additional funds for the institution to make up for the various disadvantages caused by risk losses. The consequences will help card issuers return to the level of profitability before the risk occurred. The implementation of risk management not only enables card issuers to return to their original operating levels after suffering risk losses, but also prompts card issuers to take corresponding countermeasures to catch up and achieve sustained growth after losses.

(3) Reduce worries and enhance cardholders’ sense of security. The consequences of the existence and occurrence of credit card risks not only cause losses to card issuers, but also bring worries to cardholders, special agencies and collection personnel, seriously hindering the development of the credit card business. Implementing risk management can provide people with a psychological sense of security and a relaxed environment conducive to credit card operations. Therefore, reducing people's worries about credit card risks is another important role of credit card risk management.

2． The significance of credit card risk management

Effectively preventing risk losses in credit card business and controlling possible risks are not only necessary but also very important for the stable development of credit card business.

First of all, credit card risk management is necessary to ensure the safety of the card issuer's funds and customer funds, reduce the card issuer's capital loss rate, and improve operating efficiency. Only by taking effective risk prevention and control measures, effectively strengthening risk management, and plugging various loopholes can we ensure the safety of national property, corporate property, and customer property, reduce loss rates, and increase profitability.

Secondly, credit card risk management is a need to maintain the credit card and its issuer’s own reputation. Only by strengthening the management of risks in the credit card business can we ensure the stable development of the business and lay the foundation for business development.

Third, credit card risk management can help strengthen the correct risk concept. Credit card risks may not only prevent the card issuer from recovering the money, but may also cause financial losses to other credit card agencies or cardholders. The extent and seriousness of the harm cannot be questioned. For this reason, we must strengthen the correct risk awareness.

(2) Measures to prevent credit card risks

1. Speed ??up the legislative process and combat credit card crime.

In 1999, the People's Bank of China issued the "Measures for the Administration of Bank Card Business". However, these measures have certain shortcomings when it comes to legal issues. Therefore, the government must speed up the process of bank card legislation. Formulate supporting policies and measures to ensure the healthy and orderly development of bank card business. At the same time, financial institutions must closely cooperate with industrial and commercial administration, public security, judicial and other departments to severely crack down on various criminal activities such as bank card counterfeiting, embezzlement, fraudulent use and use of bank cards for extortion, and purify the bank card market environment.

2． Improve technical prevention and strengthen credit card technical management

(1) Increase hardware investment. With the rapid development of information technology, bank card crime methods are becoming increasingly sophisticated. Card issuers must keep track of the latest technology, improve the level of technical defense, and increase investment in technical defense.

(2) Strengthen bank card supervision and standardize business operations. The country has promulgated a series of business specifications and technical standards for the bank card business. As the regulatory authority for the bank card business, the People's Bank of China must supervise card issuers to strictly implement bank card technical standards in accordance with the law, and promote bank card network integration and resource sharing. , strengthen the supervision of bank card business operation standards, promote bank card business operations to be carried out strictly in accordance with procedures, and avoid and prevent risks caused by illegal operations.

3. Create a brand, deepen reform, and create a good card usage environment

(1) Jointly strengthen and create a bank card brand. After 17 years of development, my country's bank card market is still in a decentralized and fragmented state. Mastercard International said: "When foreign banks enter the Chinese market, they are most likely to compete with their Chinese peers in the bank card business." We must vigorously improve the card usage environment and improve service quality. Improve service means, optimize the acceptance environment, clear service marketing channels, and improve service levels; vigorously promote special services for key customers and improve the professional level of bank card services; establish a domestic joint credit reporting system for personal credit to make a contribution to the development of credit card consumer credit Be prepared. Networking and alliance have become the only way for my country's bank cards to avoid risks and seek development after joining the WTO. Although all card-issuing banks have participated in VISA or MASTER international organizations and are affiliated with international organizations, they have not achieved the goals of unifying merchants and internationalizing product performance. On the contrary, the development and operation system of the domestic market has been chaotic and competitive. Sparring situation. All localities and professional banks pursue small but complete technology and equipment in

① Bank cards:

There is serious duplication of construction and lack of cooperation. With the promotion of "UnionPay" logo cards, bank cards have been gradually accepted across banks in 100 cities across the country, and "UnionPay" logo cards have been fully implemented in 40 cities. Only by strengthening cooperation and creating our own brand can my country's bank cards remain invincible in international competition.

(2) Deepen bank card reform and introduce market mechanisms. In the past, my country's bank cards were all affiliated with traditional commercial banks. To further develop the bank card business, we must deepen the reform of the bank card operating system and introduce market mechanisms.

On the basis of learning from foreign successful experiences and combining it with my country's reality, we will conduct in-depth research on the bank card operating system reform plan, actively and steadily promote the intensive operation and centralized unified management of bank card business, and promote the development of a market-oriented and professional service system.

(3) Create a credit environment and adjust the bank card structure. The development of credit cards is an effective measure to promote consumption and develop the economy. The issuance and use of credit cards rely on a good social credit environment. Truly establish a business philosophy that is market-oriented, customer-centered, and benefit-oriented, realize the transformation of business development methods to intensive and benefit-oriented as soon as possible, achieve simultaneous growth in business scale and economic benefits, and be ready to welcome foreign card issuers Preparations for the challenge. At present, our country's credit mechanism has not yet been established. Our current credit concept is single-item, static and quite one-sided. Those who deposit a deposit of more than 50,000 yuan or have guarantees from large and medium-sized state-owned enterprises can have an economic credit rating rated as A. This is the current customer credit rating rating standard for most domestic banks, and the same applies to other lower levels. In the face of dynamic evaluation standards that can objectively and comprehensively reflect the true credit of customers, such as transaction type, transaction frequency, repayment ability and consumption growth ability, they are ignored. In particular, the comprehensive credit status database of customers that can be used as the basis for the operation of evaluators is almost blank. This greatly limits the bank's risk control capabilities and credit control over its customers. It is difficult to grasp the standards for evaluating customer credit ratings. To change this status quo and adjust the structure of bank cards in our country, we must strengthen the construction of the social credit system and create a good credit environment. Only with a good credit environment can banks The large credit extension has promoted the rapid development of the credit card business. The reason why foreign banks can accurately determine the creditworthiness of each customer in the vast sea of ????people while avoiding risks, and provide them with targeted service varieties and methods, and then select and master excellent customer groups, all rely on long-term and extensive accumulation of customers. Credit status database.

Credit card business has become increasingly important and more important due to its advantages of being more flexible and convenient for transactions. my country's bank card industry is in the ascendant and has broad room for development. At present, domestic commercial banks have gradually realized the necessity of change and begun to embark on the path of joint development. The credit card business is a typical retail financial business with high returns and high risks. Therefore, we must identify the risk points existing in the development of credit cards and prevent, control, and eliminate them. We must have service outlets, machines, and terminals of sufficient scale. Able to meet the needs of customers, these electronic devices are the main carriers of credit card business usage channels. Therefore, broadening the usage channels, enjoying service terminals, and effectively preventing credit card business risks will help card issuers minimize costs and improve Gains are very necessary. In March 2002, the establishment of China UnionPay Co., Ltd. effectively promoted the process of bank cards of commercial banks across the country, laying a solid foundation for the development and growth of my country's bank card industry and facing the challenges of foreign banks.

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